trending Market Intelligence /marketintelligence/en/news-insights/trending/KC6LbclyaETlU1a4SVvjaA2 content
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

Power financiers bullish on merchant wind, gas-fired generation's longevity

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August


Power financiers bullish on merchant wind, gas-fired generation's longevity

SNL Image

A rooftop solar array at the Brooklyn Navy Yard in New York. While returns on utility-scale renewables have diminished, more favorable returns can be found in the commercial and industrial and the community solar spaces.
Source: AP Photo

Asian and European investors and Canadian pension funds remain active investors in U.S. renewables, said panelists at the S&P Global Platts Financing U.S. Power Conference in New York on Oct. 22. However, some of those same investors have seen their return on investment in wind and solar shrink, according to Mark Voccola, senior managing director in Paris-based private equity firm Ardian's infrastructure group.

"Renewable returns are too low," Voccola said, receiving some pushback from moderator Paula Zagrecki, CEO of Zorya Energy Advisors LLC.

"Everybody's saying how renewable returns are really compressed, but I think that's true of the utility-scale," Zagrecki said. "If you're going further down the market, if you're going to [commercial and industrial solar], if you're going to community solar, if you're going to the smaller developers, you can still get those returns."

Merchant wind, meanwhile, is coming into its own as an asset class, with David Janashvili, executive director at Moelis & Co., identifying it as a major trend to watch in the year ahead.

"We do see the biggest trend in the emergence of merchant renewables as an asset class," said Janashvili, who argued that merchant renewables are complementary to gas-fired assets.

Janashvili said the critical question that needs to be asked when seeking to reduce carbon emissions is, "What is the mix of solar, wind, storage and some super-peakers that is needed?"

The natural gas 'bridge' debate

Natural gas acting as a transition fuel is a popular idea in many corners of the power finance community.

"Coal's literally and figuratively a four-letter word," Voccola said, adding that coal-fired generation has become "the asset class not to speak about." Now that sentiment has partially spread to gas-fired generation.

"In some parts of the world, gas has become coal, maybe quicker than coal became coal," said Voccola, who buys into the idea of natural gas being a bridge to renewables. "I think that the bridge is a long bridge, and we're voting for that with our capital."

Meanwhile, bankers financing project development and acquisitions are factoring attitudes toward fossil fuels into their work.

"We certainly think people are pricing it as if the bridge is only five years, but the reality is there's a lot more that needs to happen," said Alan Liu, managing director at Goldman Sachs & Co. LLC. "The value here is being able to see through the long-term on these assets. It's not a five-year bridge. It's a 10-year bridge, it's a 15-year bridge, maybe even 20."

"We're building a combined-cycle project in Pennsylvania, so that bridge better be a hell of a lot longer than five years," Voccola told attendees to laughter, though he acknowledged that some large investors are beginning to swear off of fossil fuels entirely.

"You're going to have volatility, you're going to have uncertainty in policy and regulations," Liu said of large gas-fired facilities. "But these assets are needed for the infrastructure of this country."

Auctions on the decline?

Running auctions for power assets may be on the way out, said Liu, who has observed "a little bit of auction fatigue, if you will." Partly responsible are recent auctions for power assets that stalled, ultimately producing no winner and no deal.

"Bilateral negotiations, potential for private mergers between portfolios of private generation companies, joint ventures [and] sales of minority interests" are all more likely to define power M&A than competitive auctions in the year ahead, according to Liu.

"Volume's likely to be, we expect, depressed," Janashvili added, listing uncertainty around emergent storage technology as another factor that could impact the M&A market.

Regardless of process, there does remain an ideal model when acquiring a portfolio, Liu said. Operating assets paired with a project pipeline include baked-in project revenues that can seed future growth and support development.

S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.